Oil & Gas Prices - August 30

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Oil & Gas Prices - August 30

Post by dan_s »

Opening Prices:
> WTI is down $2.15 to $94.86/bbl, and Brent is down $2.92 to $102.17/bbl.
>Natural gas is down -22.2c to $9.114/MMBtu.

The Year of the Roller Coaster

AEGIS Notes
Oil

WTI dipped below $95/Bbl Tuesday morning amid political turmoil in Iraq
> Oil prices fell by nearly 2.5% after touching a four-week high of $97.66/Bbl yesterday
> Iraq announced a nationwide curfew after violent protests in Baghdad yesterday

Violent protests broke out in Baghdad, Iraq after well-known cleric Muqtada al-Sadr announced his withdrawal from politics yesterday (BBG)
> Iraq's oil exports are continuing uninterrupted amid violence in the country, said Alaa Al-Yassiri, director general of state-run oil company SOMO
> He added that the nation has the capacity to increase oil exports to all destinations, and it won't refuse any requests for more oil
> He also indicated that Iraq plans to export 3.35 MMBbl/d of oil from the south and between 0.075-0.90 MBbl/d of oil from the north in August

Nigeria, Africa's largest crude producer, saw its output fall to 1.43 MMBbl/d in the three months through June, the lowest quarterly production since 2016 (BBG)
> Nigeria has experienced its fifth consecutive quarter of decreased output due to widespread theft and vandalism
> The situation worsened at the beginning of the third quarter, with July's output dropping to 1.2 MMBbl/d, the lowest level in more than three decades
> That is far less than the 1.799 MMBbl/d Nigeria was allowed to produce that month as part of the OPEC+ quota agreement

The OPEC cartel's July production was 1.13 million barrels per day below the cartel's official quotas. Saudi Arabia's production was below their quota.

Natural Gas

Natural gas futures are down 2.3% this morning
> Temperature forecasts have shifted cooler, with the next six to ten days expected to be cooler by 8.3 degrees
> Despite forecasts coming down, temperatures following this weekend are still anticipated to be above the ten-year normal
> Today’s production receipts fell by 1.7 Bcf/d, with the majority coming from the Northeast and South Central regions

Cheniere Energy plans to expand the Gulf Coast LNG facility (Bloomberg)
> The largest U.S. exporter of LNG, Cheniere Energy, plans to expand its LNG facility according to a new regulatory filing
> The company is looking to add two production lines and a new storage tank to its facility located on the Gulf Coast
> Cheniere plans to file a formal application with FERC in February of 2023, and if approved construction would start in October 2024
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - August 30

Post by dan_s »

Trading Economics:

WTI crude futures extended their retreat and fell more than 5% to below $92 per barrel on Tuesday, after Iraq’s state-backed Somo stated that the country’s oil exports are unaffected by civil unrest due to the political exit of a prominent cleric. Iraq’s oil marketer also said that it can redirect crude supplies to Europe if needed, adding to the bearish pressure. Crude prices are set to decline for a third straight month amid the darkened outlook for the global economy. Policymakers at the ECB flagged the possibility of a 75bps interest rate hike for its next meeting, while Fed Chair Powell signaled that the US central bank will maintain borrowing at a restrictive level until inflation subsides, even if it hurts growth. Investors now await OPEC nations to meet on September 5th to decide on production policy, after the Saudi Energy Minister stated the cartel could cut production should Iran clinch a nuclear deal with the West and restore exports.

US natural gas futures slumped 5% to below $9/MMBtu, the lowest in two weeks, tracking a decline in the European benchmark and as domestic supplies were seen rising. Gas output in the US Lower 48 states rose to 98.1 billion cubic feet per day (bcfd) on Monday, its highest since August 8th, according to data provider Refinitiv. Meanwhile, European natural gas prices tumbled from record levels as Germany almost reached its target of gas inventories being 80% full. Still, prices remain not far from an over 14-year high of $10/MMBtu touched last week. A series of heatwaves this summer across the US has sent demand from gas-fired power plants to all-time highs and expectations of increased demand for US LNG exports amid growing concerns of European shortages have been supporting prices. Meanwhile, Freeport LNG announced that it would delay the restart of its Quintana export plant to November, backtracking previous statements of an October restart and limiting further upside momentum.
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MY TAKE:
> Nothing really changed. We still have a Global Energy Crisis and there is no Quick Fix.
> The "Paper Traders" set the oil and gas prices you see. After a big up day like we had yesterday, the traders set their stop loss limits very tight. One large sell order the following morning can and often does trigger a sell-off.
> Unless there is a major news event to justify the selloff, the oil price will settle at a support level and bids will start coming in to reverse the selloff.
> Looking at the chart, there appears to be strong support at $90/bbl, which is where WTI was just before Russia invaded Ukraine and it is the q3 average price I am using in all of my forecast models.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - August 30

Post by dan_s »

The Energy Report: Caught In a Trap
By Phil Flynn (Aug 30, 2022 10:51AM ET)

We’re caught in a trap; we can’t get out of because we need the oil, baby.
Why can’t they see what they’re doing to us when you can’t believe a word they sayin’?

OPEC+, which includes Russia, has put the United States into a trap but oil prices are falling back on hopes that Iraq won’t drift into a civil war. Despite what President Joe Biden said would be the toughest sanctions on Russia ever, it’s clear that Russian oil revenues are soaring and its oil is being exported just fine. Still, oil prices are pulling back after yesterday, giving support from a slew of bullish headlines on reports that political turmoil in Iraq may be settling down. Yesterday there were reports that the U.S. embassy was evacuating Iraq during political violence. The Biden administration denied that. Reuters reported that the White House said the unrest in Iraq after powerful Shi’ite Muslim cleric Moqtada al-Sadr quit politics was “disturbing” and called for “dialogue” to ease the country’s political problems. White House National Security Council spokesperson John Kirby told reporters that Washington sees no need to evacuate staff in its Iraqi embassy at this time.

Oil is pulling back on an AP report that stated: “An influential Iraqi cleric called on his supporters to withdraw Tuesday from the capital’s government quarter, where they have traded heavy fire with security forces in a serious escalation of a month’s long political crisis gripping the nation." In a televised speech, Muqtada al-Sadr gave his supporters an hour to leave — and minutes later some could be seen abandoning their positions on live television. Iraq’s military announced an end to a curfew, further raising hopes that there might be a halt to the street violence. The unrest began Monday, when al-Sadr announced he would resign from politics and his supporters stormed the Green Zone, once the stronghold of the U.S. military that’s now home to Iraqi government offices and foreign embassies. At least 30 people have been killed, officials said. “This is not a revolution,” al-Sadr said in a televised address, which followed pleas for restraint and peace from several Iraqi officials and the United Nations.

One of the problems that the oil market is going to face is that OPEC is making it clear it may be on a path to cut production, which is a direct slap in the face to the Biden administration. Countries like Saudi Arabia and Iran, which raised their selling prices for crude so countries would be encouraged to drain U.S. energy supplies, have succeeded. The Strategic Petroleum Reserve is at its lowest level almost in history or at least since 1985. And it is at the same time now reasserting its control over the global marketplace. Yesterday, the Strategic Petroleum Reserve reported that supplies fell by 3.1 million barrels to 450 million barrels last week, 800,000 of that drop was sour crude. That is the crude that we need to make distillate.

The International Energy Agency seems to suggest that it is possible that they could engineer another relief from global reserves but as far as OPEC is concerned that’s only going to play into their hands. OPEC is tired of manipulation of oil prices and oil supplies by these governments. They have made it quite clear that they believe these releases from the reserve are short sighted and they believe that the market price for oil is undervalued. OPEC has decided to do something about that and that means a potential cut in oil production.

Oil prices were also supported by violence in Libya, which has reduced supplies. The Wall Street Journal reported that clashes in Libya’s capital killed more than two dozen people over the weekend, the deadliest fighting the war-torn country has experienced in more than two years as rival political factions vie for control of the oil-rich nation. According to Tripoli’s health ministry, 32 people were killed and 159 were injured. Firing by armed groups damaged several government and residential buildings. The clashes, which abated by Sunday morning, were between armed groups loyal to Prime Minister Abdul Hamid Dbeibah in the western capital of Tripoli and militias backing a rival administration in the east trying to take the capital.

Oil prices too must worry about the Atlantic, which seems to have storms popping up all over the place. The key thing with the storms is that the energy complex has no room for error. Refining capacity is already way too tight and supplies are below average for this time of year so any storm that disrupts supply could have a direct impact on price.

The FOX Forecast Center is monitoring several tropical disturbances in the Atlantic basin for possible development over the next several days. As of Tuesday morning, the NHC still says the tropical disturbance has a 50% chance of development over the next two days and an 80% chance of developing “just east of the Lesser Antilles is a cluster of thunderstorms becoming a little bit more organized under that area of low pressure,” according to FOX Weather meteorologist Michael Estime.

Forecasters will undoubtedly keep a close eye on this area of showers and storms. “Up to 70% chances that we will see a tropical system of some sort, most likely that would be a tropical depression, which could be named by mid- to late-week,” Estime said. “That could affect our friends and family in the Lesser Antilles and over toward Puerto Rico.” There are two other areas in the Atlantic Ocean that forecasters will keep a close eye on, a tropical system over the next five days. That is unchanged from Monday.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil & Gas Prices - August 30

Post by dan_s »

Closing Prices:
> Prompt-Month WTI (Oct 22) was down $-5.37 on the day, to settle at $91.64
> Prompt-Month Henry Hub (Oct 22) was down $-0.294 on the day, to settle at $9.042
Dan Steffens
Energy Prospectus Group
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